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NGExpert financial copywriter
Page written by Chris Godfrey. Last reviewed on October 9, 2024. Next review due October 1, 2025.
Sometimes in business your ambitions can be stunted by the lack of a small amount of cash – often less than $5,000. Unplanned cashflow dips, business emergencies, sudden opportunities – many kinds of event can leave you short of cash when you least expect it – and in some instances, these minor issues can open the door to bigger problems down the road.
Fortunately, there’s an answer to this dilemma: Small business loans for $5k or less can plug financial gaps and keep your business moving forwards. Use the cash to buy inventory, pay wages, cover repairs and stay on top of your commitments.
$5,000 business loans are small financial transactions designed to cover temporary shortfalls in working capital. Although this type of funding may be obtained from traditional banks and credit unions, you will usually have better success with online lenders who have streamlined application processes and the capability to make fast lending decisions. Online lenders also tend to be more flexible when it comes to loan approvals.
Most $5k business loans come in the shape of a term loan, where you receive a lump sum and pay it back over a fixed period, usually 1 to 3 years. Alternatively, funds may be provided as a revolving line of credit – a loan facility that works like a credit card, allowing you to withdraw funds as and when you need them, and repay the debt when your customer receipts come in. Other options include SBA microloans – US government backed borrowing where your credit score is less important, or merchant cash advances – short term borrowing that uses your customer credit card revenues as security for a loan.
However, be aware that as useful as these types of loan are, not all business lenders offer them. This means you’ll need to shop around before settling on a deal. You can do this by approaching banks, credit unions and online lenders one by one, or you can use the services of a loan marketplace that will introduce you to a choice of $5k loans from different lenders. Some marketplace platforms can also give you advice and help you with the application process. This can be especially useful for business owners who have never taken out a business loan before.
Small loans for small business can come in a variety of shapes and sizes. Borrowers should select the type of loan that best fits their organization. Popular $5k loan options include:
Term loan is the simplest form of $5k loan. You receive a single, lump-sum cash injection and then pay it back in regular instalment over a fixed period – usually 1 to 3 years. Term loans can also be secured by adding a cosigner with good credit to the deal. This will also make the loan cheaper to maintain. Collateral may be required.
A business line of credit functions like a high-value credit card but comes with lower interest rates and fees. Withdraw as much as you want when you want from a loan facility up to the limit of your borrowing. You only pay interest on the sums you withdraw, not the whole credit line. This can make the borrowing significantly cheaper. Collateral may be required.
For businesses that accept customer payments by credit and debit card. A merchant cash advance allows you to borrow against the value of your card sales. As your card sales increase, your borrowing limit goes up. Your sales act as security for the loan, no added collateral is required.
Partially backed by the US government, SBA microloans come with relaxed qualifying rules and can usually be secured with FICO scores as low as 500, or even with no credit score at all. Collateral may be required.
Works like a personal credit card but usually comes with higher loan amounts and lower interest rates. Opening a business credit card account and making regular repayments can help borrowers with bad credit to improve their score. Collateral may be required.
Because $5k loans are lower than most business financing, it may be more difficult to find a lender who provides this type of funding. However, once you’ve found a deal, getting an approval should be comparable to obtaining a personal $5k loan. This is what you’ll typically need to get this type of loan:
The time it takes to fund your $5,000 loan will depend on the type of loan you’ve applied for and the lender’s approval criteria. In some cases, it may be possible to get an immediate approval and have the funds in your bank account the same day or next business day. Ask your lender how long they take to fund $5k loans during the application process.
You will usually need a personal FICO score of 600 or more to obtain a small business loan. However, if you provide collateral for the borrowing – such as real estate, inventory, or plant and machinery – or if you apply for an SBA microloan, it may be possible to obtain a $5k loan with a lower credit score.
Probably. Even if you have bad credit (or no credit), it may still be possible to get a business loan up to $5,000. Learn more about bad credit business loans here, or contact Swoop to find out how small business owners can get the financing they need even when they have bad credit.
Monthly loan repayments will vary according to the length (term) of the loan and the interest rate you pay. Use this handy loan calculator to see a range of loan options and to find out what your $5k loan may cost.
Early loan repayment is usually possible, although some lenders may levy an early repayment penalty – typically equal to one month’s repayment amount.
Few $5,000 loans are alike. Borrowers should compare the key features of different loan offers to select the best loan for their business:
Pros
Cons
No matter if you’re a business owner seeking your first microloan or you’re a seasoned borrower, working with business finance experts can make all the difference when applying for funding. Contact Swoop to discuss your borrowing needs, get help with your application and to compare high-quality $5,000 business loans from a choice of lenders. Don’t let a small dip in working capital put your business in a hole. Register with Swoop today.
Written by
Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Wells Fargo Bank, Visa, Experian, Ebay, Flywire, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of US consumer and business finance.
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At Swoop we want to make it easy for SMEs to understand the sometimes overwhelming world of business finance and insurance. Our goal is simple – to distill complex topics, unravel jargon, offer transparent and impartial information, and empower businesses to make smart financial decisions with confidence.
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